Company News

UPDATE 1-German coalition agrees on solar power cuts-sources

* Cuts for rooftop, open-field, farmland to be unchanged

* Still pending final approval by parliamentary group heads

* Slight changes to additional 2011 one-off cuts

(adds details, background)

By Markus Wacket

BERLIN, April 23 (Reuters) - Germany’s ruling coalition will only make slight changes to planned reductions in solar power incentives, sources told Reuters late Thursday, with the brunt of the cuts to remain unchanged.

The sources said parliamentary experts in Chancellor Angela Merkel’s centre-right administration agreed that so-called feed-in tariffs for new rooftop solar installations will be cut by 16 percent from July as planned.

Most open-field installations will be cut by 15 percent, with support for farmland solar systems to be scrapped completely, the sources said.

They added that cuts of one percentage point in addition to those set out in the German renewable energy act (EEG) would be made by the beginning of 2011, if newly installed capacity exceeded 3.5 gigawatts within a year.

A further percentage point would be added if installed capacity exceeded 4.5 gigawatts, the sources said of the plans, which must still be approved by the parliamentary group leaders of Merkel’s conservatives and their coalition partners, the pro-business Free Democrats (FDP).

The cabinet backed the measure to cut the feed-in tariff in March but it still needs approval from the Bundestag lower house of parliament. The plans do not need approval from the upper house of parliament, the Bundesrat, or states’ chamber.

Germany is the world’s largest market for solar power with about half of all solar power produced there. Critics of the cuts have said they could harm development of the technology.

Oversupply of cells and modules has caused prices for solar products to fall by as much as 50 percent over the past year, which has increased pressure on industry players to have more efficient production and become more competitive.

Feed-in tariffs -- prices utilities are obliged to pay to generators of renewable energy -- are the sector’s lifeline as long as grid-parity, the point at which renewables cost the same as fossil fuel-based power, has not been reached.

Utilities currently pay about 39 euro cents in feed-in tariffs per kilowatt for solar power, about eight times as much they pay for conventional power, and industry experts expect the planned cut to speed up the shakeup in the industry.

There has also been criticism of the proposed cuts from some conservative leaders in several eastern German states, where many solar companies have substantial production sites.

Consumer groups and pro-business leaders in the centre-right coalition had pressed for deeper cuts to the incentives. Consumers pay an extra three percent for power each month on their bills because of the support for solar power.

Cuts in public support will weigh on companies like Q-Cells QCEG.DE, Phoenix Solar PS4G.DE and SolarWorld SWVG.DE, which depend on demand from Germany.